Trade deficit grew in March, tariff effects just beginning: CEI analysis

According to the Bureau of Economic Analysis, the US trade deficit grew by 14 percent in March ahead of President Trump’s broad tariff announcement in April. CEI senior economist Ryan Young says Trump’s fixation on the trade deficit will only dig the nation into a deeper economic hole.

“The trade deficit is one of President Trump’s main tariff motivations. In the short run, it is having the opposite effect, as people stockpile goods before the tariffs hit. The more severe the tariffs, the more severe the hoarding.

“With tariffs now at Great Depression levels, it is no wonder the trade deficit grew 14 percent in March, ahead of Trump’s April 2 Liberation Day announcement. Future readings will depend on how quickly new tariffs phase in, or if they get walked back.

“In the long run, the trade deficit effects could go either way, and Trump has no control over it. Tariffs do reduce imports, which is what Trump wants. But they also reduce exports, which Trump wants to boost. This is because other countries retaliate with their own tariffs, and because tariffs tend to slow down economic activity in general, as evidenced by last quarter’s shrinking GDP.

“Trump’s trade deficit fixation is a mistake. The US last ran a trade surplus in 1975. In those 50 years, US income has roughly doubled, and quality of life has improved by nearly every measure, from health care quality and life expectancy to the percentage of households with air conditioning, Internet access, and other essentials.

“Trade deficits do not matter one way or the other for economic health. They neither hurt nor help.”